Home Buying in Forest Hills>Question Details

Aptbuyer, Home Buyer in 11375

Can a co-op board set a minimum price below which an apartment can't be sold?

Asked by Aptbuyer, 11375 Sun Aug 2, 2009

There are several units in a luxury building in Queens that have been on the market for over eight months. The brokers claim that the sellers will not accept a lower price because the co-op board will block the sale. They assert that comps in the building are higher and that a lower sale price will devalue the other units in the building. However the "comps" they cite are sales that took place almost one year ago when market conditions were different. Doesn't the board have a duty to effectutate a sale between a willing seller and a very qualified buyer?

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Forest HIlls coops are well known for their strict criteria, it is difficult to pass one of these boards, when compared to other areas certainly but this area is also very stable, this market suffered last in recent market recession, did not hit near the lows that other areas experienced and is recovering well. It is a good investment. Some general information to consider that most boards do: When a cooperative apartment is sold, what you purchase is shares in a corporation. If a cooperative board is responsible for and to the other owners and represent them, they will and should consider the price per share associated with a sale. If the building has a solid price per share and one sale would change that drastically to the negative it will affect future sales, meaning it will potentially devalue all the shares, or the value of all the owners they represent. It is a consideration, and for example, when banks look at loaning money for a mortgage on the cooperative they look at the recent sales, they look at the price per share, it can and does affect the appraiser's report of value for a prospective loan. it can have a ripple effect not only in the building in question but also in buildings with comparable units, these are used by appraisal companies to determine value for banks considering loans. While boards do not have to give a reason, they are allowed by law to turn down applications for financial reasons. If litigation is brought by a buyer or seller a judge can order specific performance and direct the board to disclose their reasons for turning down an application for purchase. if there was no interview, in my experience, it is not because of the buyer personally, they have never met them and are making the decision solely based on the paperwork provided. Boards in forest hills, again in my experience, typically consider some or all of the following, different boards will look at these items with varying degrees of import.
Income (usually gross, pre tax) vs debt (mortgage, maintenance, car loans, credit cards, student loans etc)
Usually in a ratio from 25% in the strictest up to 30% for the more lenient
Cushion or leftover funds, retirement, cash, bonds, investments, annuity, cd's etc
Credit history, score (reliability, responsibility over time to pay ones obligations)
Some buildings look at inflow of cash vs outflow over time (3-6mos)
# of occupants vs room count

What they are, by law, not allowed to base their decisions on are; as one might expect; race, religion, ethnicity, sexual orientation and so on.

I am a local broker in the area many years, but am not looking to promote myself, i think that the best thing a buyer or seller can do for themselves when selling or buyer a cooperative, especially in an area like Forest Hills where the boards are exceptionally thorough is to find and use a broker or agent who is familiar with the requirements and will offer that experience to qualify the buyer prior to the contract (it is in the best interest of both parties) and help the buyer to compile and present an acceptable board package. Knowing what the building wants is key to a successful and timely process.

I hope this is helpful and clear, good luck, it is a difficult process but a stable and lovely area. Jokingly we often liken it to childbirth, it is somewhat uncomfortable, then at times may be painful but long term it is rewarding and hopefully gratifying. In line with this metaphor, having a good delivery team and support during the process will make it all less frightening, maybe even exciting and positively influence the outcome...Corney but pretty accurate :)
Bunch Broker
Forest Hills NY
0 votes Thank Flag Link Wed Jun 1, 2011
I am a real estate broker for 27 yaears. I believe that a coop board has exceeded its authority if it establishes a minimum sale price, unless a minimum sale price is stipulated in the proprietary lease or unless all the shareholders have voted to adopt a minimum sale price policy.
See the case of: Oakley V. Longview Owners Inc., 628N.Y.S.2d468.
0 votes Thank Flag Link Fri Oct 8, 2010
I am a real estate broker for 27 yaears. I believe that a coop board has exceeded its authority if it establishes a minimum sale price, unless a minimum sale price is stipulated in the proprietary lease or unless all the shareholders have voted to adopt a minimum sale price policy.
See the case of: Oakley V. Longview Owners Inc., 628N.Y.S.2d468.
0 votes Thank Flag Link Fri Oct 8, 2010
Good question Aptbuyer. I had such an experience in Forest Hills but with a twist. There was a comp lower than the offer I received for my listing ad it was over a year back! The customer was highly qualified but the application was rejected by the board, no interview just rejected. My client was livid and the customer was none too happy either.

Yes, boards can and do block sales. They are under no obligation to disclose their reasons whatsoever. All I am left with is an educated guess. That guess goes to valuation and that is an elusive term. If all we have to go on are comps in the building, my deal should have worked.

I do understand a board that wants to protect the value of other shareholders and themself as they themselves are shareholders. But I believe they also have a resposibility to a fellow shareholder that wants to sell and gets current fair market value. Hence, to answer your second question, I do believe they have some level of responsibility (not a duty) to help effectuate a sale.

Having said (written) this, there is still no way to compel any board to allow a deal to go through. It doesn't seem right but it is currently what it is. We all take our lumps and move forward.

Best to you in your efforts to purchase.
0 votes Thank Flag Link Sun Aug 1, 2010
Dear apartment buyer, first you must check with the co-op board if that is really true. To answer your question, yes the board can do that just to keep the value up even though that is not the real value. If that is true then the board can turn down your application. NOW you want to question your self if you want to buy in a building where the value is not real. If you want to talk about this please feel free to call me at 646 594 6447 or email me at sshrivastav@laffey.com.
0 votes Thank Flag Link Mon Aug 3, 2009
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